Guest article by
Michael Breuer, President of the Rhineland Savings Banks and Giro Association
in the Börsen-Zeitung, special supplement "Wirtschaftsraum NRW"
Corona, war of aggression. Turning point. Energy shortage. High inflation rates, exploding energy prices and the threat of recession. This is just a small selection of terms that were not part of the active vocabulary of many people in Germany just over three years ago. In addition, global warming with dramatic consequences at regional and local level is inevitable.
Today, in spring 2023, we are looking at a world that is completely different in many areas of life than it was at the beginning of the decade. Certainties and habits have vanished into thin air in a matter of hours. Unlike many of the abstract threats of the past, today we have to face real political challenges for which there were or are still no answers. But even if we do know the answers: Can we manage a resulting course correction? Quickly, unbureaucratically, bindingly - and above all together?
Germany's unique model for success has traditionally been highly export-oriented in conjunction with a high dependency on energy and raw materials from third parties. We were well established in a globalized world based on the division of labor. However, the coronavirus pandemic and now the serious economic consequences of the war have cast impressive doubt on this. Important raw materials are no longer available to the usual extent and supply chains have been disrupted in the long term.
However, it is not only the fragile dependence on autocrats and dictators that requires rapid and sustainable transformation processes, but also setting the course towards a digitally based, sustainable society. This is, of course, a challenge for the German economy. So far, it has shown that it can overcome these challenges with its strong equity base, high flexibility and innovative strength - always supported by the German banking industry, which is well positioned thanks to its diverse structure. But one thing is clear: there are challenging years ahead for Germany and the people living here in safety. Because there will be no going back to outdated framework conditions.
North Rhine-Westphalia is familiar with change, structural transformation, reorientation and innovation. The structural change in the Ruhr region triggered by the coal crisis from 1958 remains one of the biggest transformation processes in post-war Germany. Further challenges have followed and new innovation programs have been launched. Together, we have learned how to deal with these challenges.
As savings banks, we have also made it very clear in these special times that we are actively assuming our responsibility. When the coronavirus crisis broke out in 2020, we moved closer together in North Rhine-Westphalia. A task force was set up quickly and easily - in a constellation for which there were no instructions or guidelines. Representatives from the state ministries, the representative office of the Deutsche Bundesbank in North Rhine-Westphalia, the credit industry associations, NRW.BANK, the chambers of crafts and trades, the chambers of industry and commerce and other experts joined forces.
The different points of view not only allowed ideas to be collected, but also pragmatic solutions and a wide range of justified demands to be discussed at length. Regular meetings and intensive engagement with the numerous topics created a space in which the participants were also able to focus on the framework conditions that threatened to prevent the implementation of targeted solutions.
In this context, the banking industry associations have provided several position papers with proposed solutions. Even during this long and difficult phase, North Rhine-Westphalia has shown that innovative forms of cooperation have enabled help to be provided quickly, bureaucracy to be managed and unavoidable risks to be borne jointly. The participants contributed their individual skills and expertise - to the benefit of the citizens of North Rhine-Westphalia.
Through a combination of direct aid, regulatory relief for banks and savings banks, intensive cooperation between development banks and house banks, equity-strengthening programs and greater flexibility for credit institutions in dealing with their customers, it was possible to create scope to significantly mitigate the effects of the pandemic. This unpretentious, targeted and mutually understanding interaction between all players in NRW has ensured that we have come through the coronavirus crisis well in the economic heartland of the Federal Republic of Germany.
We were grateful that we were able to quickly resume the structures we had established during the coronavirus crisis when we needed to quickly and unbureaucratically shed light on the impact of the Russian war of aggression on the economy and society in order to explore options for action. Here too, constructive dialog helped to develop packages of measures that have so far ensured that the effects appear manageable for each and every one of us - but also for the state and companies. If the multi-crisis has had one good thing, it is that the players in North Rhine-Westphalia, in politics, business and the banking industry, have found a deeper understanding and flexible forms of cooperation in recent years that have made it possible to find quick and effective solutions.
It would therefore be downright foolish not to make further use of these structures, which have grown in times of crisis, in the upcoming Herculean task of transforming our economy, particularly with regard to the question of its financing. There is a great need for action for this purposeful exchange. There is still a lack of coordinated interaction. Many energetic and motivated entrepreneurs often do not yet know how they can best shape the transformation process for their company. They do not know what is important in their specific situation or what legislators and more and more people and stakeholders expect of them.
As a result of cooperation with internationally active groups, more and more regulatory requirements are becoming relevant, and banks have to request more extensive and detailed information in connection with loan applications. At the same time, the legal requirements are not decreasing. And the banking industry itself is also faced with the challenge of implementing the regulatory requirements, advising customers along the way, ensuring that projects can be implemented as part of overall bank management and pointing out funding opportunities that make the path easier for customers.
I therefore strongly advocate that all relevant players in the transformation state of North Rhine-Westphalia continue to develop solutions in a structured and mutually respectful manner based on the formats established over the past three years. It is no coincidence that, as part of this collaboration, the German Economic Institute (IW) has conducted a study on how the digital and climate-neutral transformation of companies in NRW can best succeed.
We have presented the results of the study to politicians and discussed them with all business associations in NRW, right up to the level of business consultations in chambers of industry and commerce and chambers of skilled trades. The study provides a good groundwork for the dimension of the financing requirements as well as ideas as to which instruments we can use to cover this immense need. Only if all participants understand each other's role and agree on a common goal will it be possible to implement the transformation quickly and successfully.
We as savings banks are ready for this. Who, if not local savings banks with their focus on the common good, are particularly qualified to work and operate sustainably? Who, if not local savings banks with their expertise in regional conditions and knowledge of SMEs, are particularly well suited to resolutely financing the necessary structural changes, the redesign of supply chains, decarbonization and the energy transition? But here, too, it is clear that will alone is not enough. It is about finding the right framework conditions and partners and bringing them together.
The billions in future investments can only be implemented if private capital can also be mobilized. It is therefore important to offer savers a co-financing option and thus allow them to participate more in the economic opportunities of transformation financing.
The ecological transformation can only succeed if we enable as many companies as possible to move from a “brown” to a “green” industry. Savings banks, state banks and Deutsche Leasing have direct access to three quarters of German companies. We have the highest level of trust among this clientele and special credibility in supporting this transformation. We also have to or want to finance companies that are not yet sustainable today, but have made a comprehensible journey. However, it is important that the appropriate framework conditions exist here too in order to enable transformation with targeted financing.
We should discuss all these issues and come to solutions. Structures that have proven themselves in crises are stable and can be a good basis for future-oriented solutions. With targeted cooperation between politics, business, the banking industry and representatives from the various socio-political areas, the transformation can succeed. Together!
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